How potential knowledge spillovers between venture capitalists' entrepreneurial projects affect the specialization and diversification of VC funds when VC effort has value


Journal Article

Research concerning diversification and specialization of venture capital funds typically does not consider how a VC's effort might influence performance of different portfolios. We develop a model that analyzes VC effort when there is the potential for cross-sectional and/or serial knowledge spillover among projects. The model generates two implications concerning VC effort and performance. First, VC post-investment effort is a nonmonotonic function of performance shocks, especially for diversified VCs. Second, greater cross-sectional and serial knowledge spillovers improve the performance of specialization relative to diversification, and shape how the number of decision stages in a project affects portfolio choice. © 2011 Strategic Management Society.

Full Text

Duke Authors

Cited Authors

  • Kang, HG; Burton, RM; Mitchell, W

Published Date

  • September 1, 2011

Published In

Volume / Issue

  • 5 / 3

Start / End Page

  • 227 - 246

Electronic International Standard Serial Number (EISSN)

  • 1932-443X

International Standard Serial Number (ISSN)

  • 1932-4391

Digital Object Identifier (DOI)

  • 10.1002/sej.115

Citation Source

  • Scopus